Best Practices for Responding to Chargebacks With Reason Code “Cardholder Claimed Not to Participate”

In Part 1, we gave an overview of what chargebacks are and how merchants can respond to chargebacks with the reason code, “Product or Service Not Received or Merchandise/Service Not Provided.” In the next several installments in our series, we will continue to cover some best practices for even more chargeback types. This week we’ll focus on “Cardholder Claimed Not to Participate” chargebacks.

What does “Cardholder Claimed Not to Participate” Refer To?

Chargebacks that fall under this category are those in which the cardholder claims not to have made the purchase. This chargeback can be filed due to fraud; if the customer doesn’t recognize the transaction; or if the customer is fraudulently attempting to get a refund (also known as friendly fraud).

Best Practices for Responding to Chargebacks With Reason Code “Cardholder Claimed Not to Participate”

In order to mitigate damage from such chargebacks, it’s essential that Merchants adhere to the following practices:

  • Provide the customer with detailed invoices and itemized receipts to ensure that the customer is well aware of all charges involved.
  • Keep clear documentation for every payment made by the customer. For example, if the customer first pays a deposit and later on makes one or more payments, each transaction should be recorded and it should clearly state what each payment was for.
  • Request proof of delivery with all shipments and require a signature upon delivery. This helps attest to the fact that the customer approved the order, even if they say otherwise.
  • Provide clear terms and conditions, as well as clear refund policies, and have the customer sign them. This will ensure that the customer is aware of each transaction, and it also serves as evidence that the customer approved each transaction.
  • For card-present transactions, only process EMV chip-cards, as these transactions are much less likely to be fraudulent.
  • For card-not-present transactions, it’s ideal to only process orders in which the customer enters the same billing and shipping addresses. This is a good sign that the customer is legitimate and not a fraudster.
  • Address Verification System (AVS) is a security feature for card-not-present transactions that checks to make sure that the billing address provided by the customer matches the billing address on file with their bank. While it’s not always possible to only process transactions in which the billing and shipping addresses match, AVS is always a great option for merchants to use.
  • If you are suspicious of the cardholder’s identity, you can call the cardholder’s issuing bank to verify that the information that the cardholder provided is the same as what’s on file with the bank.
  • Code 10 verification requests are another more robust identity verification option. With a code 10 verification request, you can call the card issuer’s authorization center, who in turn contacts the cardholder to make sure that the transaction is legitimate.

Fidelity’s Chargeback Alerts Program is here to help merchants respond to chargebacks fast! Click here to learn more.

Stay tuned for our next installment!